FORM 20-F - Check Point

CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share amounts)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Year ended December 31,
Employee Stock Options 2007 2008 2009
Expected volatility 42.81% 38.57% 35.00%
Risk-free interest rate 4.60% 3.05% 2.61%
Dividend yield 0.0% 0.0% 0.0%
Expected term from vesting date (years) 3.24 3.55 3.62
Employee Stock Purchase Plan
Expected volatility 22.78% 31.15% 46.90%
Risk-free interest rate 2.00% 1.92% 0.31%
Dividend yield 0.0% 0.0% 0.0%
Expected term (years) 0.5 0.5 0.5
u. Fair value of financial instruments:
The Company measures its cash equivalents, marketable securities, ARS, and foreign
currency derivative contracts at fair value. Fair value is an exit price, representing the
amount that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. As such, fair value is a market-based
measurement that should be determined based on assumptions that market participants
would use in pricing an asset or a liability. A three-tier fair value hierarchy is established
as a basis for considering such assumptions and for inputs used in the valuation
methodologies in measuring fair value:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or
liabilities in active markets.
Level 2 - Include other inputs that are directly or indirectly observable in the
marketplace.
Level 3 - Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value.
v. Comprehensive income
The Company accounts for comprehensive income in accordance with ASC No. 220,
“Comprehensive Income”. This statement establishes standards for the reporting and
display of comprehensive income and its components in a full set of general purpose
financial statements. Comprehensive income generally represents all changes in
shareholders’ equity during the period except those resulting from investments by, or
distributions to, shareholders. The Company determined that its items of other
comprehensive income relates to gain and loss on hedging derivative instruments and
unrealized gains and losses on available for sale securities.
w. Treasury stock
The Company repurchases its Ordinary shares from time to time on the open market or in
other transactions and holds such shares as treasury stock. The Company presents the cost
to repurchase treasury stock as a reduction of shareholders’ equity.
F-21